How to Stay on Top of Your Accounts Payable
Even the smallest business has to pay bills, and needs to manage their accounts payable process so that it runs smoothly. After all, if you misplace an invoice and neglect to pay, it could damage your relationship with your vendors and contractors.
Below are several options for streamlining your accounts payable to help your business run more smoothly, and increase its growth potential.
Invest in Accounts Payable software
New software packages can help you manage your external invoices, such as vendor payment requests, as well as internal invoices like employee expense reports. These software packages can:
- Reduce AP errors, such as entering incorrect payment and expense amounts, attaching incorrect check numbers to invoices and expenses, and late payments;
- Provide modules that allow AP transactions to flow smoothly;
- Ensure that the correct payment terms are attached to each vendor, such as Net 30, Net 90, etc.
- Have a reporting function that lets you know which invoices are pending, which are in process, and which have been paid; and, much more.
If your business has AP responsibilities form multiple streams, this software can help you stay on top of everything.
Be Aware of Possible Fraud
Any time there’s money involved, there is also the possibility of fraud. By being aware of the types of fraud you could encounter, you can take steps to prevent it.
The most common type of AP fraud is the dummy invoice, or dummy vendor, usually set up by an employee of your company. Your company pays these fake invoices and the money goes to the employee. While this is a common scam, it is not the only type.
Expense reimbursement fraud is another area. Some common types of fraud include reporting personal expenses as business expenses, reporting expenses for items that have already been reimbursed, and manipulating receipts. You could also encounter issues which involve employees inflating their expenses.
Implementing policies and procedures, such as dividing up tasks so that the person who sets up vendor accounts does not have check-writing capability, and requiring original documentation instead of copies for expenses can help reduce your risk. Additionally, you could set up a process whereby you review each new vendor before they are added to the system. You could also implement software solutions. For example, Chrome River solutions offers automated, real-time spend policy compliance monitoring and approval routing.
Simplify Your Accounts Payable Process
Keep your number of check runs at a maximum of two per month for both vendors and employee expenses. If you do runs more often, you could end up seriously bogging things down. If you have a separate person or department handling your AP functions, make sure they are aware of the cash limits for each check run, so they know which invoices and expenses to pay when. Give your AP people more latitude to run the AP process.
For example, while you as the owner might be responsible for signing the checks, you don’t need to participate in the check runs. Additionally, your AP people could run the aging reports, make decisions on which invoices and expenses to pay in each run, print the checks, and get them approved before bringing them to you.
Giving them that kind of latitude will free you up to focus on other aspects of your business.
Negotiate Vendor Terms
Vendors will often set their Net terms on their invoices, but that does not mean those terms are set in stone. Often you can call your vendors and negotiate better Net terms that would work better with your check runs and other aspects of your AP process.
Of course, keeping your account in good standing means you will have better luck negotiating a better term, so make sure you stay on top of those invoices, and communicate any payment issues with the vendor, until you can update the terms.
Featured image credit: Financial Operations/ShutterStock